Jim Zellmer's View from Madison

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Rise of the American Professional Sports Cartel

There’s one thing strange about “competitive” sports teams. Although teams compete with one another for championships, they act in unison to protect one another’s business; they are a cartel. Therefore, a league should actually be considered a single, uniform entity. They vote together and present a single face towards outsiders in all business matters.

We see this behavior strongly enforced when a team’s owners experience financial turmoil. In a competitive environment, the fittest survive and the weak perish; in the professional sports world, the league supports the struggling team through financial distress. For example, the MLB league office gave an emergency $25 million loan to the New York Mets owners after they struggled to pay their expenses. It also happened in 2010 when the owner of the NBA’s Charlotte Hornets, George Shinn, was struggling financially. The league purchased the Hornets from Shinn and the Hornets were jointly owned by the 29 other teams’ owners until an official purchaser could be found.

Another mark of a cartel is exclusivity, No single owner can join the league or do what he wants without the approval of the rest of the league. During the Hornets sale process, many potential owners emerged who wanted to move the Hornets out of New Orleans. Oracle CEO Larry Ellison had offered $350 million – far above market value – but was widely thought to want to move the team to his native Bay Area. The NBA refused to let Shinn sell his own private property at the best price. He could only sell to a person who would keep the team in New Orleans.